Venezuela Devaluation: Multinationals Lose More Than $1.5 Billion

Venezuela’s government gains billions of dollars as foreign companies lose more than one billion dollars.

BY LATINVEX STAFF

US and European multinational companies have lost more than $1.5 billion on the February 13 devaluation of the Venezuelan currency, according to a Latinvex analysis.

While foreign investors lose, Venezuela’s government stands to gain an additional 84.5 billion bolivars ($13.4 billion) in revenue, mostly from oil sales done in dollars, according to Bloomberg.

Meanwhile, the International Monetary Fund praised Venezuela’s devaluation, which shaved 32 percent off its value. “We welcome the policy measures announced by the Venezuelan authorities last week that can help reduce macroeconomic imbalances,” Garry Price, the director of the fund’s external relations department, said at a press briefing on February 14.

More companies are expected to announce loss figures the next few days and weeks. They include companies like Arcos Dorados, Clorox, Energizer, Gruma, Kimberly-Clark, L'Oreal, Mapfre and Unilever and Spain’s BBVA bank.

The devaluation, the fifth in nine years, has led to consumers rushing to buy products amidst fears of price increases and further inflation.

Venezuela’s inflation last year reached 27.6 percent, the highest in Latin America, according to a Latinvex analysis. This year, the IMF had estimated a rate of 28.9 percent before the devaluation. In January, prices grew by 22 percent, the fastest in eight months, according to Bloomberg.

Meanwhile, neighboring Colombia is preparing for an avalanche of Venezuelan contraband.

Several economists and other experts warn that the latest devaluation will only worsen Venezuela’s economy as previous ones have.

“During Hugo Chávez’s presidency, the bolivar has been devalued by 992 per cent,” wrote Moises Naim, a former Venezuelan development minister, in the Financial Times. “The measure will fall short of correcting the country’s profound macroeconomic imbalances.”

Otto Reich, a former US ambassador to Venezuela, warns that the government policies are only bringing the country closer to a Cuba-style bankruptcy. “There are now reports of severe food shortages in Venezuela, including milk, bread, sugar, poultry, dairy products and cooking oil,” he wrote in The Wall Street Journal last week. “None of this should be surprising. Shortages are inevitable when socialist governments interfere with free markets through price and other controls. Then government officials blame the growers, manufacturers, distributors or retailers that the government itself is bankrupting.”